Managing an ISA for Someone Who Lacks Mental Capacity

An ISA belongs to one person, and only that person can normally run it. If they can no longer make their own decisions, someone else has to step in with the legal authority to act, and the ISA provider has to accept that authority before anything can be changed.

The usual route is a lasting power of attorney (LPA) covering property and financial affairs, registered with the Office of the Public Guardian. An older enduring power of attorney (EPA) can still be used if it was signed and witnessed before October 2007, but once the holder loses capacity the attorney must register it before it can be used¹. Where no power of attorney exists, the Court of Protection can appoint a deputy instead.

Once authority is in place, the ISA itself carries on. Money in an ISA stays free from UK Income Tax and Capital Gains Tax while it remains in the ISA, and an attorney taking over the running of the account does not change that². What does change is who signs the forms, who speaks to the provider, and who is answerable for the decisions.

Who can manage an ISA when the holder lacks capacity

Capacity is decision-specific. Someone may be able to decide what to have for lunch but not whether to move a stocks and shares ISA into a cash ISA. The test is whether the person can understand the decision, weigh the information and communicate a choice at the time it needs to be made⁷.

If they can still make their own decisions, they can give someone power of attorney themselves. Someone can only give you power of attorney if they are still able to make their own decisions⁸. That is why these arrangements are usually set up well before they are needed.

If capacity has already gone and no power of attorney exists, the fallback is an application to the Court of Protection for a deputyship order. This is slower and more expensive than an LPA, which is one reason providers and advisers describe an LPA as the way to remove the time and cost of a deputyship application⁹.

There is also a narrower role for an independent mental capacity advocate (IMCA), who must be appointed when a person cannot make certain important decisions and there is no one able to speak on their behalf beyond health and care staff¹¹. An IMCA supports and represents the person; it is not the same as holding financial authority.

For day-to-day money, a third-party mandate or a joint account is sometimes suggested. Which? does not recommend opening a joint bank account with someone for whom you also hold lasting power of attorney, because of the legal complications it creates¹². A joint account also does not give access to an ISA, since an ISA is held in one name only.

Lasting power of attorney or deputyship: which one you need

An LPA is a way of giving someone you trust the legal authority to make decisions on your behalf if you lose the mental capacity to do so in the future, or if you no longer want to make decisions for yourself⁹. It is still valid after the person loses mental capacity, but it must be set up while they still have it¹³.

To make an LPA, the person must be over 18 and able to make their own decisions¹⁴. They can appoint as many attorneys as they like, and replacement attorneys¹⁵. In England and Wales an LPA can cover property and financial affairs, or health and welfare, or both¹⁶. In Northern Ireland an enduring power of attorney covers financial matters only, not health and welfare¹⁶.

An EPA is the older form. It has been replaced by the LPA and it is not possible to make a new one¹⁷. If an EPA was signed and witnessed before October 2007 it can either continue to be used, or be cancelled and replaced with a property and financial affairs LPA¹. Its scope covers decisions about finances, property and investments¹⁷.

In Scotland the equivalent is a continuing power of attorney, which can be used to help with financial matters before the person is incapable¹⁸.

Registering your authority with the ISA provider

Registration with the Office of the Public Guardian and acceptance by the ISA provider are two separate steps. An LPA must be registered with the Office of the Public Guardian before it can be used with NS&I, and NS&I says setting one up can take up to 20 weeks³. In Northern Ireland, an enduring power of attorney is registered with the Office of Care and Protection¹⁸.

Providers then ask to see the document. The Financial Ombudsman Service says it needs a copy of the power of attorney document to check the person named as attorney, and that this can be a paper copy or, in England and Wales, an access code to view it online; an original or certified copy is not needed⁴. For an EPA, signed copies are shown to banks and financial providers so the attorney can manage the accounts¹.

What an attorney or deputy can and cannot do with an ISA

An attorney steps into the holder's shoes for financial decisions. That includes debts, mortgaged property and investments⁸. It does not include health and welfare decisions unless a separate health and welfare LPA exists, and in Northern Ireland an EPA covers financial matters only¹⁶.

On opening a new ISA, providers differ. NS&I says you can apply on behalf of someone else under a power of attorney or Court of Protection order²⁰. Leeds Building Society says attorneys can sign the ISA application form where a lasting power of attorney or Court of Protection order is in place, but that where an enduring power of attorney is not registered with the Office of the Public Guardian, the account holder must sign the form instead²¹. Some providers go further: Hodge's Online ISA Fixed Rate Saver states that power of attorney, guardianship and intervention order holders acting for an account holder are not permitted²².

On paying in and taking out, the ISA rules apply as they would to the holder. Money taken out of an ISA during the year still counts towards that year's limit and loses its tax advantages²³. A Lifetime ISA is stricter: withdrawing the entire pot triggers a 25% charge on the total amount, including the government bonus²⁴.

An attorney cannot be paid for the role unless the LPA document authorises it²⁵. Attorneys are also subject to oversight: the relevant authorities can request information about how power of attorney is used and check decisions, and may arrange a visit or contact people who know the donor²⁶.

Does the ISA keep its tax-free status once an attorney takes over?

Yes. Money in an ISA remains free from UK Income Tax and Capital Gains Tax while it stays in the ISA². That is a property of the ISA, not of who operates it, so an attorney or deputy running the account does not disturb it.

What can disturb it is a withdrawal. Taking money out during the tax year still uses up part of the holder's ISA limit for that year, and the money loses the tax advantages once it leaves²³. For a Lifetime ISA the position is sharper still, because withdrawing the whole pot triggers a 25% charge on the total, including the government bonus²⁴.

Can I manage the ISA through the provider's app or online account?

It depends entirely on the provider's own third-party access process. Some accounts are built for remote management: Halifax's Instant ISA Saver can be managed online, in the app, in a branch or by phone²⁷, and RBS's Instant Access ISA can be opened and managed on the mobile app, online or by telephone²⁸. NS&I's Direct ISA can be applied for and managed online or by phone only²⁰.

Where an attorney needs access, the practical step is to ask the provider what its third-party access team requires before assuming the existing login can simply be handed over. Providers such as Barclays and Zempler Bank publish dedicated power of attorney processes²⁹, and building societies including Family Building Society, Saffron and Leeds Building Society set out their own requirements⁹.

What happens to the ISA when the holder dies

A lasting or enduring power of attorney automatically ends when the person dies⁵. The attorney should contact the Office of the Public Guardian and send the power of attorney document, any certified copies and a copy of the death certificate⁵.

The ISA itself can carry on. A continuing ISA remains open and earning interest tax free until the administration of the estate is complete, the ISA is closed, or three years since the death, whichever occurs soonest³¹. No money can be paid into the deceased's ISA during administration, but it continues to benefit from its tax treatment⁶.

A spouse or civil partner may be able to inherit an additional ISA allowance up to the value of the ISA at the date of death²⁰. Skipton Building Society sets out the eligibility for an additional permitted subscription: being the surviving spouse or civil partner of someone who held an ISA and died in the last three years, or, if they died earlier, it being less than 180 days since the administration of their estate was completed³¹. A Lifetime ISA ends on the date of death, with no charge to withdraw the funds or assets²⁴.

When an attorney or deputy misuses the money: where to get help

Misuse of a power of attorney is a criminal offence. The maximum penalty is an unlimited fine, 10 years' imprisonment, or both¹².

If you suspect an attorney is misusing someone's money, the Office of the Public Guardian can investigate concerns about an attorney's conduct, and the relevant authorities can request information about how power of attorney is used and check decisions²⁶. The Financial Ombudsman Service can look at complaints brought by an attorney on the donor's behalf, and will ask for a copy of the power of attorney document to confirm who is named⁴.

Free, impartial help is available. MoneyHelper offers guidance on power of attorney and on managing money for someone else. Debt advice charities including StepChange can help where debts are involved, and their advisers can assist with court proceedings³³. In Northern Ireland, Advice NI provides money and debt guidance³³. Age UK publishes guidance on what to do when someone dies and on powers of attorney⁵.